The dollar recouped some of its overnight losses on Tuesday, while Asian shares slipped as investors shrugged off upbeat U.S. home sale data and took light profits on recent rallies.
Financial bookmakers expected shares in Europe to open lower while U.S. equity futures were down 0.2 percent.
The dollar recovered ground as investors in Asia grew more cautious ahead of a string of U.S. economic data this week and the start of the Christmas shopping season on Friday after the U.S. Thanksgiving holiday, which will be a key test of consumer confidence.
The dollar gained 0.3 percent against a basket of major currencies after falling in New York where the market took comments by a senior U.S. Federal Reserve official on Sunday as further evidence the central bank would maintain its very low interest rate policy for some time.
Trading at 75.272, the dollar index was above a 15-month low at 74.679 reached last week.
Dealers in Tokyo said some investors were closing dollar short-positions ahead of the Thanksgiving holiday.
Asian shares slid, despite a solid performance on Wall Street after data showed existing home sales reached their highest level in two-and-a-half years, as profit taking set in.
The Shanghai market was worst hit with the dollar-denominated B-share index plunging more than 8 percent by mid-afternoon as investors gave up on hopes for government measures to support the market.
Such speculation, including one that China might merge B shares with an international board being set up for foreign firms to list in Shanghai, had sparked a near 20 percent market rally earlier this month.
The MSCI index of Asia Pacific stocks traded outside Japan fell 0.6 percent but it has already rallied 66 percent this year, leading some investors to question whether data is strong enough to justify further gains at this stage.
I think everyone has been waiting for a downturn for so long and it hasn't come. There's a bit of nervousness out there, you've got gold at record levels, said Martin Angel, a dealer at Patersons Securities in Australia, where shares slid 0.7 percent.
Revised third-quarter U.S. GDP data and a U.S. consumer confidence report later on Tuesday will give more clues on the strength of the world's largest economy.
Sales at U.S. retailers on Friday after the holiday could yield vital clues to the recovery power of American consumers, whose spending accounts for more than two-thirds of the economy. They could also signal whether Asian exporters can expect a rush of late orders before Christmas.
The Thomson Reuters index of regional shares was virtually unchanged.
Shares in Japan fell 1 percent as a firm yen hit exporters shares and investors worried about the economy.
Japanese stocks show a striking divergence with their Asian peers. While the MSCI Asia Pacific ex-Japan is only just below a 14-month high and sitting on gains of nearly 70 percent this year, the MSCI Japan languishes at a seven-month low and is negative for the year.
Policy uncertainty is helping depress sentiment. Japanese Finance Minister Hirohisa Fujii said on Tuesday that demand was weak and fiscal policy alone could not revive it, putting pressure on the Bank of Japan to respond to deflation and fanning a policy dispute between the government and the central bank.
The Bank of Japan is asleep at the wheel as usual, banking minister Shizuka Kamei told reporters.
Japan Airlines was one of the biggest losers, tumbling 8.4 percent, hitting a record low at one point, on fears the struggling carrier could face bankruptcy.
As the dollar steadied, gold retreated to $1,166 an ounce as investors booked profits after the precious metal scaled a record high at $1,173.50 on Monday.
Traders, however, said sentiment remained bullish, underpinned by expected prolonged weakness in the dollar which makes bullion cheaper for holders of other currencies and boosts its appeal as an alternative asset.
Investors were also taking profits on the Australian dollar, which succumbed to a wave of profit taking from stellar gains before the year ends. A trader with a U.S. bank said hedge funds had been among the biggest sellers of the Aussie in recent days.
Oil prices were little changed at around $77.60 a barrel ahead of a weekly inventory report due later from the American Petroleum Institute.
The market is basically in a holding pattern, awaiting more data, said Peter McGuire, managing director of Commodity Warrants Australia.
(Additional reporting by Victoria Thieberger in MELBOURNE and Jennifer Tan in SINGAPORE; Editing by Kazunori Takada)
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